China Struggles with Middle Class Expectations, Labor Unrest

All is not well in China. As we approach the July 4th independence celebration in the US, the Chinese are trying hard to ignore growing discontent with their political and economic systems.

Just recently, massive pro-autonomy protests in Hong Kong, and economic talks with Taiwan, were on the Chinese leadership plate. This follows continued unrest in the Western provinces from the Muslim Uighurs, and increased strife within China’s own workforce, which is demanding better wages and conditions.

All of this is happening in a society that is still in transition, from largely agrarian toward an ambitious new urbanization plan, which will see millions of Chinese transplanted to urban areas in the next six years. That kind of cultural change is certain to spark even more discontent, from people who are growing increasingly restive thanks to Middle Class standards created by the market reforms of the post-Mao years by Deng Xiaoping.

While China grapples with its new status as the world’s largest economy, it still has an authoritarian mindset when it comes to protest. As noted by the recent 25th anniversary of the Tiananmen Square uprising, turning state-approved violence against any uprising is on the first page of the game plan.

But killing them all won’t be a long-term solution. As the Chinese are quickly finding out, you can’t expect rising living standards to breed satisfaction with the status quo. People are funny like that — hopes and dreams grow as more is attained.

Internal Security Costs Rising

The most dangerous aspect of dealing with those hopes is how to maintain the economic might that spurred the growth. China is actually losing business, partly because of its bureaucratic paralysis when it comes to accommodating Western business, and partly because it is losing its role as a center of manufacturing. It is now being challenged by countries whose wages and production costs are even lower than China’s.

A 2012 report by the European Union-funded Europe China Research and Advice Network (ECRAN) detailed the growing discontent. Public protests, worker disruptions, and out-and-out riots rose from 8,700 in 1993 to an estimated 180,000 – 230,000 in 2010. As a result, the report notes that the Chinese government had to spend more on internal security (USD $111 billion) than it does on national defense ($106 billion).

Also fueling discontent is the increasing use of mobile devices and the Internet. China has a thriving Internet presence, and even though officials block sites and monitor speech, ingenious users manage to circumvent the roadblocks to vent their frustrations.

The unrest likely won’t topple the Chinese government. But it will lead to more democratic reforms, higher wages for workers in industry and government, and a likely increase in spying on dissident voices. It won’t lead to co-opting Hong Kong or Taiwan, leaving them in their own orbits as long as they don’t stray too far from China. The usual blustering pronouncements from the mainland official media are given and taken as boilerplate reactions.

Far more dangerous to the Chinese leadership are the rising expectations of the mainland’s people. Tens of thousands of wildcat strikes are believed to happen inside China, and they are proving to be effective in raising wages and social benefits. That may fuel inflation, and with that, a whole new set of economic challenges.

As China is learning, being a world economic leader is both a blessing and a burden. While it’s unlikely that regime change is in the works, it’s also unlikely that China can maintain its current level of economic activity and political influence without some serious societal and political change.

Or, as an old Chinese proverb notes, “Not only can water float a boat, it can also sink it.”